Existing bankruptcy procedures are costly and cumbersome resulting in a low take up. The new Civil Law (Miscellaneous Provisions) Bill 2010 includes some long overdue amendments to the bankruptcy law, writes Delia McMahon.
Existing bankruptcy procedures which continue to be governed by the provisions of the Bankruptcy Act 1988 are not only cumbersome but are also costly to implement as is clearly evidenced by the fact that there were only 50 Bankruptcy Petitions in Ireland last year and 20 the previous year.
The Civil Law (Miscellaneous Provisions) Bill 2010 (the “Bill”) published on 30 August 2010 proposes amendments to various civil and regulatory laws, including a number of long overdue amendments to the Bankruptcy Act 1988 which are briefly summarised below:
(i) The proposed reduction of the period where an application can be made to Court for discharge from bankruptcy from the current twelve year period to six years. Discharge within that timeframe will continue to remain subject to existing conditions being satisfied (i.e. payment of the expenses, fees and costs of the bankruptcy and preferential debts). An application for discharge can of course be made at any time prior to the six-year period where a bankrupt can either pay all his/her creditors in full, or alternatively, where he/she obtains the consent in writing of all creditors to his/her discharge from bankruptcy.
The introduction of a reduced six-year period of discharge will still leave Ireland outside the existing European average bankruptcy discharge period of between three and five years.
(ii) The introduction of a new automatic discharge from bankruptcy upon the 20th anniversary of a bankruptcy adjudication order.
It is estimated that this will result in the discharge of approximately 300 “legacy bankruptcies” currently remaining in the system.
(iii) The existing legislative position whereby a bankrupt individual is entitled to an annulment of an adjudication of bankruptcy where he/she shows cause within three days from the date of service of the copy of the order of adjudication of bankruptcy (extendable to 14 days by the Court), or, in any case where, the Court itself forms the opinion that the individual ought not to have been adjudicated bankrupt continues to remain unaltered by the Bill.
(iv) Where the Court is satisfied that the realised proceeds of the entirety of a bankrupt’s property as at the date of application for discharge would be sufficient to pay a dividend to the creditors, the Court is obliged under the provisions of Bill not to discharge the bankruptcy until such time as this dividend has in fact been paid to the creditors. Thereafter, any remaining property is revested or returned to the bankrupt by way of conveyance, assignment or transfer, as appropriate.
(v) The current statutory limit of costs which the Official Assignee has the power to agree is proposed to be increased from €7,000 to €10,000.
The provisions of the Bill were formulated as short term measures arising from the Law Reform Commission’s “Interim Report on Personal Debt Management and Debt Enforcement” published in May 2010. Further additional reforms to bankruptcy laws are expected following consideration of the Law Reform Commission’s “Final Report on Personal Debt Management and Debt Enforcement” which is due by the year end.
It is expected that such further reforms will witness a more debtor rehabilitative approach being implemented through the introduction of a two-tiered bankruptcy system incorporating a new non-judicial debt settlement system operating in tandem with a more streamlined bankruptcy Court process by way of offering a much wider framework to address issues of personal indebtedness. It is also likely that this broader framework will lead to the extension of the operation of the existing IBF-MABS Operational Protocol to a wider range of creditor representatives other than IBF members. However the specific timing and implementation structure of any such longer term reform is as yet unknown.
